Reflecting on Brambles' (ASX:BXB) Share Price Returns Over The Last Year
It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Brambles Limited (ASX:BXB) share price is down 15% in the last year. That contrasts poorly with the market return of 3.6%. The silver lining (for longer term investors) is that the stock is still 7.1% higher than it was three years ago.
View our latest analysis for Brambles
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the unfortunate twelve months during which the Brambles share price fell, it actually saw its earnings per share (EPS) improve by 8.1%. Of course, the situation might betray previous over-optimism about growth.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
Revenue was pretty flat on last year, which isn't too bad. However, it is certainly possible the market was expecting an uptick in revenue, and that the share price fall reflects that disappointment.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Brambles stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Brambles' TSR for the last year was -13%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Brambles had a tough year, with a total loss of 13% (including dividends), against a market gain of about 3.6%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for Brambles that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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